By Don A. Holbrook and Ian C. Holbrook
Have you ever had a pesky nuisance that never seems to go away, no matter how hard you try? If so, you, Wall Street, and the banks are more similar than you think; their nuisance is called cryptocurrency and it just can’t seem to go away. Unlike the normal house fly that may pester you, cryptocurrency is a much more threatening and powerful nuisance with a valid reason to stick around and rationale behind its use, development, and expansion.
What business owners, consultants and others that sell their goods and services need to do is be on the forefront of this technology and banking revolution. Like most things, learning before stepping more than ankle deep is necessary for cryptocurrency. Getting started sooner than later is best and imperative for maximizing knowledge and having a chance to participate in the innovative space that is cryptocurrency. It’s important for businesses to posture for a shift in the dynamics of their current fields, learn the future of banking and commerce, and have exposure to the potential upside of crypto that almost seems too good to be true.
What I ask you to imagine is the very serious reality that the modern banking system will change and a lot of positions of power will be transitioned by cryptocurrency. This has not happened in a millennium and will not likely happen again in your lifetime nor that of your children and their children’s grandchildren.
Let’s explore one of the biggest myths of this time, cryptocurrencies are just a fad of the Millennial generation. This new disruptive global economic force is a product of Millennials, and it was designed with very sophisticated properties that make it a permanent force in the monetary landscape. The hard truth is the inevitability of cryptocurrency’s properties and systems supplanting modern structures of finance, banking, and business.
You may ask yourself what is the basis or foundation of cryptocurrency, how is it legitimate? The first place you’d start is talking about the decentralized financial system. A blockchain (combined chains of blocks of data represented as currency) captures transactions between two parties that participate amongst its environments. Simply, it is a digital ledger of transactions with a timestamp and two addresses that send/receive currency and this data can be viewed at any time on the blockchain (like in Bitcoin’s example of blockchain). The important idea to keep in mind is that the data that enters each block of the blockchain is irreversible and captured in time with all parties involved. When the block is filled with data (transactions), a new block begins to grow with transactions.
Ledgers and notes were the primary use of banks in their infancy!
There was a side of a ledger that accredited people with usable credit lines based on the other side of the ledger, debit: properties/monies that individuals owned. The banks operated as a keeper of records that were legitimized by their patrons and their users gave credence to their bank notes and ledgers.
Crypto has an aspect of operating as a digital ledger, but it is not limited to this. It is decentralized. It does not have a central power manipulating its direction, it does not have national treasuries assuring its worth, and it is not utilized as a vehicle to promote certain governments’ agendas or politics.
It is permissionless. Unlike your banks where you have to ask to move money between two entities, make payments, withdraw large amounts, or deposit/withdraw from the bank, crypto does not have any permission requests. You control your finances. There’s no red-tape.
Think about the history of lending particularly in reference to loans? There has been a large discriminatory history of lending based on race, national origin, co-signers/vouchers of someone’s credibility, credible jobs, and it has been manipulated to create advantages for those in control of the vehicle of finance: banking. The Fair Housing Act in 1994 amended requirements for multifamily mortgages due to this very reality and how discriminatory housing loans were towards people of color.
Crypto does not share these characteristics in its identity like that of modern lending and banking. You can choose to put up your collateral and borrow against it, except you can do this in minutes instead of waiting days to hear you’ve been denied by traditional lending sources.
The next question you may ask yourself is where did crypto begin, what’s its origin story? In 2008, an anonymous person named Satoshi Nakamoto founded Bitcoin. He appeared out of the nebulous of the ether realm and then faded away three years later. However, his creation has now spawned thousands of new digital currencies, companies, and an ecosystem rivaling the likes of Wall Street and modern banking. The two cryptos that seem to be driving the value and stability market are Bitcoin and Ethereum. Today, they stand as a powerful adversary challenging the U.S. Dollar and its institutions underpinning its relevance and credibility.
The Crypto market has created a growing value system of barter that is now worth over two trillion dollars and it is proving that it can handle 100x the number of trades when in comparison with its value. Ethereum is in the process of proving that it is not only stable enough to replace modern banking, but it is more capital efficient and it can handle transactions at least 1000:1 in comparison to traditional finance. This means that the six to seven trillion dollars traded daily across the globe, Ethereum will be able to support its stability with a fraction of the monies committed inside of its ecosystem than Wall Street to allow for the throughput and flow of trade. There are more complexities when it comes to modernizing and replacing banking, but for all intents and purposes, Ethereum has hundreds of companies dedicated to driving this behemoth to the heights it needs to reach to combat the world’s banking infrastructure.
The cryptocurrency system is turning many early adapters into newly minted millionaires and billionaires for those who got in within its infancy.
Familiarizing yourself with crypto now may not just be great for creating a posture into crypto, however it may help a rapid conversion of a preferred tender for transactions that could be on the foreseeable horizon before 2025. Capability, flexibility, and proficiency is a necessity for survival for any business conducting transactions in the new, post-Covid Global Marketplace.
There are advantages to crypto that boomers and old school business minds tend to still see as a disadvantage, however the millennials see the exact opposite. For example, crypto is not backed by a Central Bank thus old school mindsets see that as a risky unstable investment. Millennials see it differently. They see a currency that is not tethered to a manipulated stock market and government regulatory oversight. This to them does not represent stability or volatility, it represents freedom of oppressive rules that slows down or, in some cases, manipulate transactions to the favor of insiders, which they cite as evidence in the Game Shop fiasco.
Crypto is completely free of government regulation; however, it is tethered to a digital wallet that remains in the ownership of the cryptocurrency owner whether online via an entrusted encrypted wallet service like Metamask or as hardware like a USB as in the example of Ledger. This tetherless and institutionless wallet, as some call it: Bankless, represents to the Millennials a speed with which to transfer wealth and conduct transactions at instantaneous speeds. You could, for example, conduct a deal for $27,000.00 USD value where the party you perform a service for pays you from their digital wallet to your digital wallet where you can immediately use these funds to purchase or fund another transaction.
On a microscale, active capital is beneficial for small businesses because it allows for possibilities and opportunities to be actioned when they come across your door, however on a macroscale it amalgamates into momentum that can hyperdrive innovation and trade to levels of sustainability and optimization that have yet realized in the status quo.
In crypto’s current condition there are very small fees for transactions; however, these fees are actively being improved upon with hopes to be eliminated or made infinitesimal. Crypto is still expanding and optimizing its complex and diverse ecosystem and even with its current transaction costs, the costs do not outweigh the benefits of using it.
In recent years, we have seen the expanded use and legitimization of cryptocurrencies known as stable coins that act as intermediates tethered to the value of the U.S. dollar to include VISA’s accepted stablecoin USDC (US Dollar Coin). These stablecoins allow for users to transition some of their digital wallet into usable dollars instantly when utilizing a crypto block card, giving access to the user’s funds that they’ve transitioned into a stablecoin like USDC. Thus, USDC and block cards are just like using a normal debit card for cryptocurrency users.
The normal float period that traditional banks make on holding our funds is negated and now the Crypto Entrepreneur can experience value appreciation of their own holdings through interest for the use of their cryptocurrency in other transactions. Two blockcards that are currently used frequently are Ternio’s Blockcard and BlockFi’s Blockcard.
I had the opportunity of receiving an example of crypto real applicability during a conversation at a coffee shop with a Crypto Entrepreneur that we will keep anonymous. He/she was debunking two boomer generation real estate investors with his/her own example of cash is king.
The Crypto entrepreneur said, “I can take $15,000.00 in USD value, purchase my cryptocurrency and reinvest it allowing for it to be used as a stable coin and another cryptocurrency, let’s say MATIC, and earn a transactional fee for every transaction I participate in. Or let’s say I can loan my crypto or I can put it to use by staking it with Ethereum or Cardano.
The alternative would be to use that money for the down payment on a piece of real estate, let’s say hypothetically $100,000.00. I now must leverage my $15,000.00 and pay the cost of the mortgage difference, $85,000.00. Let’s just say my net gain even after I rent it, pay property taxes, and income taxes equates to zero, but I am banking on real property appreciation to show me the value I desire over time. I am exposing myself to the risk of market volatility and depending upon renters to pay their rent to me. During Covid, Millennials saw that exposure and there was a lesson they took out of the global pandemic. Rent can be delayed by government actions.”
This same Millennial displayed the power of Decentralized Finance (DeFi) by portraying the ways crypto can make passive income. Lending, yield farming, liquidity providing, and staking are all ways cryptocurrency can be money that goes to work for you. That saying, let money make money for you, is the difference between wealth accumulation and growth and the surviving off a paycheck.
For the sake of length and time, we will only cover liquidity providing. Liquidity providing is a simple way to ensure stability in the market and transactions occur instantly while being provided a fee for the use of that individual’s liquidity (liquidity provider fee). Usually, these fees are .25 percent of the transaction value and liquidity providers act as a larger aggregation in a liquidity provider pool that splits this fee for each transaction to ensure that they can cover the size of transactions by working together. Depending on a liquidity provider’s share of that pool, they will be paid their share of the .25 percent accordingly for each transaction that comes across that pool. To give some perspective, some of these pools are $100 Million or more in size and some are as small as $100,000. Now, liquidity providing is not foolproof, but it is magnitudes more safe in its risk calculus than modern real estate. $15,000 dollars currently can earn approximately the same amount of money as the rent from a $500,000 house that is renting for $2,000 dollars monthly off of a 160 percent APY seems absurd but is being realized in more than one pool on Polygon’s new matic mainnet liquidity pools as of May 25, 2021.
Providing liquidity for a stablecoin (USDC) and Ethereum (ETH) on Polygon’s mainnet currently has an APY (annual percentage yield) of over 100 percent. This APY is still occurring in light of the market crash that occurred on May 18, 2021. This is how those who are getting into crypto now are letting their money make money for them while simultaneously being capable of removing their weekly or even daily passive income with their Blockcard and buy a coffee.
Lastly, I’d like to highlight that the aforementioned examples are not including the capture of growth that Ethereum and Matic (Polygon) have had in 2021 alone which are well over 100 percent returns for investors that invested in January of 2021.
So, what can businesses take away from this booming economic force? They need to find a way to use a portion of their own income made from the sale of their own goods and services that they can invest into the Ethereum ecosystem of cryptocurrency to create a position that may have the ability to grow and help the business learn the intricacies of the crypto metaverse. Think of this like the first days of operating a smartphone and just how hard that was to figure out when transitioning from a flip phone.
This crypto position can be utilized as a secondary income or investment through the same age-old concept of dollar cost averaging a portion of the businesses’ proceeds into this non-regulated market. Cryptocurrency may never replace the U.S. dollar fiat system, but just like the Hawala barter and value trade system that exists and operates today, so shall the cryptocurrency block chain system. It is better to participate than to miss out completely from the potential revolutionary vehicle that is cryptocurrency, it is looming in the distance whether it comes today, tomorrow, or the next, it’s coming.
Bio: Don A. Holbrook is a 25-year veteran economic development site location and incentive consultant. He and his team have worked on projects across North America and around the globe. His focus is primarily on place-based economic development tourism strategies and designing the team and products that communities’ can use to attract such investments. He lives in Las Vegas, Nevada and has written five, best-selling books speaking frequently around the world at professional functions. He has been featured on CBS, NBC, Fox, ABC, PBS television and radio networks, and in LA Times, USA Today, New York Times, Washington Post, FDI (the Economist Group) and many local television, print and radio interviews. He has been one of the North American Judges for FDI Magazine for the past six years on The Best Community Economies for Growth & Investment. He is a former board of director of the International Economic Development Council, and Fellow Member of IEDC, as well as Certified Economic Developer.
Ian C. Holbrook graduated with Honors with a degree in Legal Studies, B.S., from the United States Military Academy West Point in 2017. He completed a track in nuclear engineering and enjoyed many studies such as psychology, economics, and English. Ian was a Kimsey Scholar and worked at the World Bank aiding with the reformation of the Somalian Security Sector in the summer of 2015. He is finishing his service to the country and transitioning after serving as a Platoon leader and Commander in the Army into civilian work focusing on digital technologies and cyberspace.